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Arabian full-service carrier Oman Air has announced a comprehensive restructuring plan that will take up to three to four years to complete. The restructuring is done “in the interest of financial sustainability and operational continuity”, the airline said on August 8. Oman Air to enter deep restructuring to turn losses around.
Minister of Transport, Said Hamoud Al Ma’awali, held a press conference in Oman for local media to announce the restructuring. This follows on a full review of Oman Air and subsequent recommendations from consulting firm Oliver Wyman.
The airline has been loss-making for some years, although it hasn’t disclosed financial statements. According to Al Ma’awali, losses are “significant.” They deepened during the pandemic, although local media reported in May that the 2022 full-year loss had been narrowed by 35 percent compared to 2020. Revenues increased by 128 percent over 2022 and were expected to grow by 236 percent in 2023, which would help reduce narrow losses by 56 percent.
In April, the airline and Ministry of Transport commissioned a review to see how Oman Air could be turned around again. Back in 2021, the carrier already abandoned plans to grow the fleet to seventy aircraft and said it would target a fleet of around 36-40 aircraft. The carrier currently has 45.
Break-even in three to four years
According to The Times of Oman, Al Ma’awali announced the establishment of a transformation office to support the restructuring. The plan is to turn around Oman Air from losses to break even in three to four years and produce a profit in four to five years. Part of the restructuring is the nomination of an interim CEO for six months with Nasser Al Salmi, who has taken over from Abdul Aziz Al Raisi.
The restructuring includes four pillars: financial sustainability, corporate governance, commercial aspects, and human capital. Part of this is a review of the network and whether to continue services to certain destinations.
SalamAir to be integrated
“High on the programme’s agenda” is the integration of low-cost subsidiary SalamAir, which launched operations only in January 2017. At the same time, the Minister said that Oman Air and SalamAir will have to complement each other. SalamAir currently has a fleet of fourteen leased Airbus A320ceo and A321neo family aircraft.
SalamAir announced a firm order for six Embraer E195-E2s last October. The status of this order is unknown, but according to The Times of Ofman, the minister hinted during the press conference to a halt of new aircraft. Oman Air has no direct outstanding orders with Airbus, but Boeing’s unfilled orders list shows five MAX and eight 787-9s. The active fleet includes four A330-200s, six -300s, eight 737-800s, five -900ERs, thirteen MAX 8s, two 787-8s, and seven -9s.
Al Ma’awali stressed the importance of the aviation sector to the economic growth of Oman, but continued losses are no longer sustainable. The days of unrestricted state support are gone and Oman Air will have to support its own financials.
He also referred to the accelerated growth of the industry in nearby countries and regions, including India. Indeed, Arabian airlines have seen strong growth since travel restrictions were relaxed or fully lifted and produced strong results. As such, it seems that Oman Air has waited too long and lost an opportunity to restructure during the pandemic.
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